FedUpUSA

Archive for August, 2010

I think there were those of us who warned about this happening.  My own insurance premiums have gone up over 20%.  America, you were sold a bill of goods.  Pelosi wasn’t lying that the bill had to pass for everyone to be able to see what was in it.  The ‘healthcare reform bill’ was not, nor was it ever intended to help anyone with healthcare costs – it was always nothing more than a tax grab by the federal government, which is desperately trying to get their hands on your money without having to take direct responsibility for raising your taxes.  So, this time, they disguised it as ‘healthcare reform.’  The next one will be in the form of Cap & Trade in the name of ‘saving the environment.’  Don’t say you weren’t warned.

This past month millions of Americans got notice from Blue Cross/Blue Shield providers across the country that their insurance premiums were going way up effective immediately. Here is the terse reason CareFirst/ Blue Cross/Blue Shield of Washington gave its subscribers for raising a monthly premium from $333 to $512 on a middle aged man who is healthy, is not a smoker and is not obese: “Your new rate reflects the overall rise in health care costs and we regret having to pass these additional costs on to you.” 

Recently, Fox News anchor Bill O’Reilly also received a similar notice from his health care provider, (Anthem Blue Cross), and was told that his annual premium will increase by $2,100. 

The excuse given was the same boilerplate as set forth above. 

An 85-year-old New Yorker received notice from his health care provider, (Empire Blue Cross/Blue Shield), wherein he was notified that: 

1. His Medicare deductible is being increased from $1,068 to $1,100; 

2. His co-insurance liability for skilled nursing facilities is being increased from $267 per day to $275 per day and that 60 lifetime reserve days is being increased from $534 to $550; 

3. His Medicare Part B deductible is being increased from $135 to $155. 

American health care providers are gouging consumers in advance of Obamacare taking effect in 2014. 

According to publicly available profit and loss statements, our nation’s largest health care providers such as  Humana, Wellpoint, United Health Group, Cigna and Aetna collectively posted a net income of over 12 billion dollars in 2009. 

Is it not just a little bit suspicious and beyond coincidence that so many Americans are receiving these letters from separate “independent” health care providers all over the country? The letters are almost identical in content and verbiage. 

According to the Consumers Union report, not-for-profit Blue Cross/Blue Shield groups are raising health insurance premiums by as much as double digits to build up their cash reserves — in some instances to more than three times what states require. 

It is no secret that these companies generate substantial investment income from reserves. 

Here are just a few of the worst examples cited by Consumers Union: 

- Blue Cross Blue Shield of Arizona raised its reserves from $648 million in 2007 to $717 million in 2009  (more than seven times the amount required in that state). During that time, individual policy rates jumped about 40 percent. 

- Health Care Services Corp., which includes Blues plans in Texas, Illinois, New Mexico and Oklahoma, built up its surplus from $6.1 billion in 2007 to $6.7 billion in 2009, five times the minimum in those states.  Meanwhile, its plans’ rates rose by up to 20 percent a year. 

So which is it? Are the companies raising rates to build reserves or are they raising rates in advance of rising costs they are anticipating by Obamacare, or are they raising rates because of an actual rise in the delivery of actual medical costs? You cannot get a straight answer. 

If, in fact, health care providers are sitting on piles on cash that is far in excess of what it should be under state laws, why are they not rebating those surpluses to policyholders, as many automobile insurance companies do? 

Another example of how Obamacare has influenced the behavior of health care providers is that under the new federal law it mandates that no more that 20 percent of every premium dollar be attributable to administrative costs. Therefore many companies who currently run 26 percent of administrative costs for every dollar have now “reclassified” many administrative services as “medical” so they do not lose income and can avoid reducing overhead. 

FoxNews

Sometimes it isn’t necessary to quote facts and figures about government debt, unemployment and the trade deficit in order to convey how badly America is decaying.  The truth is that millions of Americans can watch America rotting right in front of their eyes by stepping out on their front porches.  Record numbers of homes have been foreclosed on and in some of the most run down cities as many as a third of all houses have been abandoned.  Unemployment remains at depressingly high levels and the number of Americans on food stamps continues to set new records month after month.  Due to severe budget cuts, class sizes are exploding and school programs are being eliminated.  In some areas of the U.S. schools are even going to four day weeks.  With little to no funding available, bridges are crumbling and street lights are being turned off in many communities.  In some areas, asphalt roads are actually being ground up and turned back into gravel roads because they are less expensive to maintain.  There aren’t even as many police available to patrol America’s decaying cities because budget problems have forced local communities across the U.S. to lay off tens of thousands of officers.

Once upon a time, the American people worked feverishly to construct beautiful, shining communities from coast to coast.  But now we get to watch those communities literally crumble and decay in slow motion.  Nothing lasts forever, but for those of us who truly love America it is an incredibly sad thing to witness what is now happening to the great nation that our forefathers built.

The following are 18 signs that America is rotting right in front of our eyes….

1 – Due to extreme budget cuts, school systems across the United States are requiring their students to bring more supplies with them than ever this year.  In Moody, Alabama elementary school students are being told to bring paper towels, garbage bags and liquid soap with them to school.  At Pauoa Elementary School in Honolulu, Hawaii all students are being required to show up with a four-pack of toilet paper.

2 – According to the American Association of School Administrators, 48 percent of all U.S. school districts are reporting budget cuts of 10 percent or less for the upcoming school year, and 30 percent of all U.S. school districts are reporting cuts of 11 to 25 percent.

3 – In Chicago, drastic budget cuts could result in an average class size of 37 students. 

4 – The governor of Hawaii has completely shut down that state’s schools on Fridays - moving teachers and students to a four day week.

5 – According to the Federal Highway Administration, approximately a third of America’s major roadways are already in substandard condition.

6 – All over the United States, asphalt roads are being ground up and are being replaced with gravel because it is cheaper to maintain.  The state of South Dakota has transformed over 100 miles of asphalt road into gravel over the past year, and 38 out of the 83 counties in the state of Michigan have now turned some of their asphalt roads into gravel roads.

7 – According to the U.S. Department of Transportation, more than 25 percent of America’s nearly 600,000 bridges need significant repairs or are burdened with more traffic than they were designed to carry.

8 – In a desperate attempt to save money, the city of Colorado Springs turned off a third of its streetlights and put its police helicopters up for auction.

9 – The state of Arizona has eliminated funding for full-day kindergarten and has shut down a number of state parks.

10 – Over the past year, approximately 100 of New York’s state parks and historic sites have had to cut services and reduce hours.

11 - In Georgia, the county of Clayton recently eliminated its entire public bus system in order to save 8 million dollars.

12 – Elsewhere in Georgia, 30,000 people recently turned out to pick up only 13,000 applications for government-subsidized housing.   A near-riot ensued and 62 people were left injured.  The amazing thing is that all of this commotion was just to get on a waiting list.  There are no aid vouchers even available at this time.

13- In the city of Philadelphia, rolling fire station “brown outs” recently cost a 12 year old autistic boy named Frank Marasco his life.

14- Oakland, California Police Chief Anthony Batts says that due to severe budget cuts there are a number of crimes that his department will simply not be able to respond to any longer.  The crimes that the Oakland police will no longer be responding to include grand theft, burglary, car wrecks, identity theft and vandalism.

15- The sheriff’s department in Ashtabula County, Ohio has been slashed from 112 to 49 deputies, and there is now just one vehicle remaining to patrol all 720 square miles of the county.

16 – Of 315 municipalities the New Jersey State Policemen’s union recently canvassed, more than half indicated that they were planning to lay off police officers.

17 – Not that the criminals are doing that much better.  Things have gotten so bad in Camden, New Jersey that not even the drug dealers are spending their money anymore.

18 – Almost everyone knows someone who has been severely impacted by this economic downturn.  A new Rasmussen Reports national telephone survey has found that 81 percent of American adults know someone who is out of work and looking for a job.

So can’t the states just step up and start spending more money and fix these things? 

Well, no.  The truth is that the states are absolutely broke.  Quite a few of the states are actually on the verge of default, and there is no getting around the fact that budget cuts that are much more severe are going to be required in the years ahead. 

So can’t the U.S. government step in and bail out the states?  

Well, yes, but as we have detailed previously, the U.S. government is literally drowning in a sea of red ink.  The U.S. government is already spending an amount of money equivalent to approximately 25.4 percent of GDP this year.

How much more money can the U.S. government possibly spend?

To get an idea of just how bad things are already, the IMF says that in order to fix the U.S. government budget deficit, taxes need to be doubled on every single U.S. citizen.

Are you ready to pay double the taxes?

No matter how you slice it, the U.S. is in a massive amount of financial trouble and the American people are starting to realize this fact.  In fact, one new poll found that nearly two-thirds of Americans believe that the U.S. economy will get worse before it gets better.

But unfortunately things are not going to get “better” – at least in the long-term.  The decay and the rot that have already set in are only going to get worse. 

These problems did not appear overnight and they are not going to be solved overnight.  Our leaders have been making very bad decisions for decades, and all of those bad decisions are starting to catch up with us.

The Economic Collapse

Now here’s not something you see on CNBS every day….

Treasury bears have been waiting a long time for China to start selling treasuries. It finally happened (not that two months is that much of a trend). Nonetheless, treasury bears got their wish. The result was not what they expected but it is what I expected: US demand picked up.

Please consider U.S. 10-Year Yield Drops to 16-Month Low, Narrows Yield Curve

Treasury 10-year note yields fell to their lowest level in more than 16 months as reports showed manufacturing in the New York region expanded less than forecast and foreign purchases of U.S. government debt climbed.

Two-year note yields dropped to a record low as the Federal Reserve prepared to buy Treasuries tomorrow as part of its plan to spur the slowing economy by keeping borrowing costs low. The difference between yields on 2- and 10-year note yields narrowed for a third day to the flattest yield curve since April 2009. A report from the National Association of Home Builders/Wells Fargo showed builders unexpectedly turned pessimistic.

Do Economists Ever Expect Bad News?

Economists’ consensus forecast for unemployment, GDP, interest rates, consumer spending, manufacturing and darn near everything else has been far too optimistic for years. What it takes for them to realize things are not going well and are likely to continue to not go well remains a mystery.

“We are heading back to a weaker economy,” said Theodore Ake, head of Treasury trading at Societe Generale in New York. “It feels like a recession, even though we are not in one. We are creating another bubble, but it won’t burst for one to two- years.”

Recession or Depression?

Given that the NBER never declared the end to the recession that started in 2007, how does Ake (or anyone) know we are not in a recession?

The proper question is not “Are we in a recession?” but rather “Is this a recession or a depression?” I think we are in a depression.

The difference between yields on 2- and 10-year notes narrowed to 2.09 percentage points. The so-called yield curve typically flattens when investors anticipate a slowdown. It widens when investors anticipate a recovery because they demand more compensation for the risk that growth will spark inflation.

Global demand for long-term U.S. financial assets rose in June from a month earlier as investors abroad bought Treasuries and agency debt and sold stocks, the Treasury Department reported today in Washington. Net buying of long-term equities, notes and bonds totaled $44.4 billion for the month, compared with net purchases of $35.3 billion in May.

The report also showed China’s holdings of long-term Treasuries fell for the first time in 15 months to $839.7 billion, a 2.5 percent drop. Its overall Treasury position declined for a second month to $843.7 billion, the lowest since May 2009. The decline represents the first year-over-year decline in China’s Treasury holdings since 2001. The holdings peaked in July 2009 at $939.9 billion.

“June represents a relatively weak month of debt buying,” David Ader, head of U.S. government bond strategy at CRT Capital Group LLC in Stamford, Connecticut, wrote in a note to clients today. “What is notable is China’s selling of coupons.”

Notable Happenings

The notable happening is not China’s selling of treasuries. That selling is perhaps an outlier, a random fluctuation, or more likely a direct result of increased US demand.

Rather the notable happening is the massive rally in treasuries in spite of Chinese selling.

“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Fed said Aug. 10. It announced it will invest the principal payments from its holdings of mortgage-backed securities into longer-term Treasury securities in the same statement.

Manipulation? Of Course!

No doubt treasury bears will look at that paragraph and scream “We Waz Robbed”. The reality is …

1. Fed cannot change the trend; The Fed can only goose the trend or slow it down.
2. The economy was clearly weakening.
3. It was pretty clear the Fed would resort to these tactics when the economy weakened.

Thus, there was no reason to be shorting treasuries, and there still isn’t.

Massive Treasury Rally Continues

The above chart courtesy of Bloomberg.

Once again the rally is across the board with the longer dated treasuries gaining the most. Note that 7-year treasuries are below 2%!

Yield Curve May 2008 to Present

click on chart for sharper image.

For about a month the long bond yield was on a shelf of support at or near 4%. It has been on a tear since then, with yields dropping the most of any spot on the curve.

This is not bullish for equities, nor is it a “deflation scare”.

This IS deflation at work. After a respite in 2009, the US is back in deflation. Those pointing at prices, the CPI, and other such things do not understand what deflation is, nor do they understand what is important.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Seriously.  This tripe is so bereft of logic and actual mental acuity that it is unworthy of graduation from elementary school:

About that math: Legally, Social Security has its own, dedicated funding, via the payroll tax (“FICA” on your pay statement). But it’s also part of the broader federal budget. This dual accounting means that there are two ways Social Security could face financial problems. First, that dedicated funding could prove inadequate, forcing the program either to cut benefits or to turn to Congress for aid. Second, Social Security costs could prove unsupportable for the federal budget as a whole.

Baloney.  This is called fraud in the private-sector.  First, there is no dedicated funding.  Second, all the money taken in over the years was not “invested”, it was spent.

Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund.

That so-called “trust fund” is a fraud.  It does not exist.

Here’s what actually happens (and Krugman knows this, which makes him a damned liar besides):

• Your tax dollars go to Treasury.

• Treasury keeps them and issues “special” Treasury bonds to the Social Security “trust fund.”

• Treasury counts these tax receipts against the federal deficit, making it look (much, until the last year) smaller than it really is.

Note the slight-of-hand here.  Social Security gets an alleged “bond” but they can’t sell it to anyone but the Treasury.  That is, legally it is an IOU, not a bond.  A bond can be marketed in the open market to anyone who is willing to buy, for whatever they’re willing to pay.  These are unmarketable (intentionally) and thus can only be redeemed in one place – at Treasury.

The problem is that Treasury spent the money and thus doesn’t have anything with which to redeem the IOUs!

So in order to redeem these alleged “bonds” Treasury will have to sell more bonds – this time to the general public (foreign governments, people, etc) who have actual capital surplus, because Treasury doesn’t – it blew that surplus on social spending programs right here and now.

This is similar to you coming to me with $100,000 and I “promise” to hold on to it for you and keep it “safe.”  I give you a promissory note to this effect.  But I never hold the funds – I immediately go blow them on hookers, coke and limousines.  You now have a bunch of IOUs, and I have no money.

Now perhaps I can manage to sell someone else some bonds when you come to redeem those IOUs.  Perhaps.  But what is unmistakable and true is that the money you allegedly “deposited” with me was immediately dissipated, not invested, saved, held or secured.

This little scheme seems to work just fine provided that each year the Social Security system takes in more than it spends on benefits – that is, so long as the file cabinet full of IOUs continues to get bigger.  Treasury gets the appearance of “Free Money”, Social Security is able to pay benefits, nobody’s the wiser.

But it’s a scam, because in point of fact the so-called “Special Bonds” are nothing more than a bare promise to pay and the asset against which they were issued (tax receipts) was instantly dissipated!

So what happens when Social Security starts to eat into that so-called “trust fund”?  Immediately, Treasury needs to sell more debt.  Ok, that sounds reasonable – but on what terms – that is, at what interest rate – will Treasury have to pay in order to sell that debt?

If you surmise that there’s every possibility that we’ll face a “Greece” moment long before 2037, you’re correct.  In fact, we could face that as soon as three or four years from now.

It is this that the Commission folks are worried about, and with good cause.  As we have repeatedly seen these sorts of fraudulent accounting schemes are both extremely common in government and work really well right up until they collapse – and when they collapse they tend to do so without any warning at all.

What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution.

What’s really going on here is that LIEberals have run this scam for 50 years and accumulated a bunch of IOUs that have absolutely no capital behind them, since they have already SPENT the capital on their other fairy-tale projects which have, in turn, failed to produce to claimed and expected increase in Treasury cashflows.

And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.

The hardship was created by stealing the Social Security tax receipts and lying about the so-called “Trust Fund.”  Everyone involved in that, including those in the LIEberal media, ought to be brought up on charges and jailed.

Those who believe that there is an actual “Social Security Trust Fund” are either lying or have an IQ smaller than their shoe size.

Either way, listening to them and believing this tripe, if you’re expecting to actually receive Social Security and structure your life around that belief, is a great way to wind up destitute, homeless, hungry and cold.

The Market-Ticker